Commentary | Trade and Globalization

Who Wins From the Sub-Saharan Africa Trade Proposal?

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The Sub-Saharan trade bill is the latest in a series of attempts to change the rules of trade to benefit multinational investors at the expense of workers in the United States and abroad. This particular proposal would eliminate provisions in current trade law that provide minimal incentives for African countries to improve labor conditions. In its place, the House version of this proposal would require that, in order to have greater access to the U.S. textile and apparel markets, African countries would be required to:

  • Reduce “high” corporate taxes, lowering the ability of the nations to raise revenues.
  • “Control” government spending, which would lead to cuts in education, health care, and investments in roads, water, and other types of critically needed infrastructure.
  • Guarantee royalty payments to foreign holders of copyrights and patents, which will increase product prices in Africa.
  • Privatize industries in sectors such as natural resources and public utilities, including electricity, phone, water, and communication systems, often at fire-sale prices.
  • Prohibit countries from requiring that foreign corporations provide specific economic benefits to the host country.

New policies are clearly needed to encourage democracy and economic development in Africa. However, the policies now being discussed will not achieve these goals. The primary benefit being offered to Africa is the elimination of tariffs and quotas on apparel imports by the U.S. from 42 Sub-Saharan African countries. However, in return for the sacrifice of minimal worker protections and the surrender of sovereignty, these poor nations are unlikely to see many of the presumed employment benefits. Among the most important reasons is that the new proposed set of rules will not prevent:

  • Increased “transshipments” of apparel from China and elsewhere in Asia, which simply touch down at an African port before being shipped elsewehere. Although the bill prohibits such activity, there is no funding for monitoring and enforcement.
  • Movement of Asian labor to Africa. The bill does nothing to prevent the establishment of production colonies. For example, today 5,000 nonresident apparel workers from China and other countries are employed in Mauritius, one of two African countries with a current quota. There have also been massive increases in exports to the United States of apparel made with imported labor from the Northern Mariana islands under similar duty-free and tariff-free rules. U.S. imports from the Northern Marianas reached $800 million in 1997 alone.

U.S. workers will also see their jobs, wages, and working conditions negatively affected by the bill’s failure to prohibit sweatshops and child or prison labor as a precondition for countries to gain eligibility for expanded trade. In addition, the bill deliberately increases the flow of low-wage textile and apparel imports at a time when such imports are expected to rise substantially as an aftermath of the crisis in Asia. The net effect will be further job loss and disruption of family and community life in areas dependent on employment in the textile industry.

U.S. textile and apparel employment declined from a peak of about 2.4 million workers in 1973 to 1.4 million in 1997. The pace of job loss has accelerated since 1989, as shown in the table below. After a brief hiatus between 1991 and 1994, job losses quickly accelerated once again in 1995. NAFTA, and especially the Mexican Peso crisis, explain a large share of the job losses between 1995 and 1997 in these two industries, with Mexican apparel imports soaring in this period.

Between 1994 and 1997, textiles and apparel lost 229,000 jobs. Women and minorities were disproportionately affected: in these two sectors, women held 60% of the jobs, blacks 19%, and Hispanics 17% in 1995 (totals for Asian workers are not reported but also significant).

Small towns, especially in the South, will be particularly hard hit by the destruction of jobs in the textile and apparel industries. The loss of such plants threatens the economic base in hundreds of small communities, as well as the jobs and lives of merchants, teachers, and other government employees whose communities depend on those industries for the spending and tax base they provide. Six of the top 10 states in apparel and textile employment are in the South (North Carolina, Georgia, South Carolina, Alabama, Virginia, and Tennessee), where small towns play a predominant role in state economies.

Given the steady growth in apparel production and exports in Mexico and the Carribean Basin Initiative countries, these job losses will only continue in the future. Moreover, at least 98,000 jobs are at risk in the textile and apparel industries because of increased imports from Asia in 1998 and 1999 (see “American Jobs and the Asian Crisis,” Economic Policy Institute, 1998). While some of these imports could displace imports from the Americas, the Asian crisis will clearly cause a sharp increase in the rate of job loss in these two industries. Losses are likely to exceed 100,000 per year in 1998, 1999, and into the next century.

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